Centrica is being urged by the City to withdraw from a £4bn commitment to build new nuclear power stations in partnership with Electricité de France (EDF) amid soaring costs and delays at a prototype reactor at Flamanville in France.
The call comes days before the company will reignite the row over high domestic energy prices by reporting six-monthly operating profits at its British Gas Residential Energy division of £300m even before its latest price rises.
Meanwhile, a House of Commons report out on Monday demands that energy companies found guilty of mis-selling their products on the doorstep and elsewhere should pay compensation.
Centrica should "not touch with a barge pole" the new nuclear build (NNB) joint venture with EDF to build four new plants in Britain, argues Lakis Athanasiou, utilities analyst with Evolution Securities.
"Centrica is a minority holder in a technology in which it has no institutional understanding, and where, as emphasised by Flamanville, construction risk is notorious. Centrica should not progress new nuclear further, particularly if [the] government is unwilling to take construction risk," he says.
The Evolution view reinforces concerns expressed by other investment specialists such as Citigroup, which has previously questioned the economics of building new nuclear plants. It is a blow to EDF and the government, which are both keen to see ageing power stations replaced from a source that used to provide almost a quarter of Britain's electricity.
EDF, mainly owned by the French state and the operator of dozens of atomic plants in its home territory, revealed last week that the cost of constructing the new power station in Normandy had almost doubled since its original budget. The building work has been hit by problems including accidents and the need for changes in the plant's construction after the explosion at the Fukushima plant in Japan, which was hit by the tsunami in March. It is now running four years behind schedule.
Vincent de Rivaz, the chief executive of EDF in Britain, has admitted the schedule for opening new plants in the UK by 2018 is slipping but denies this is a delay. He says the company is just a "taking stock".
The nuclear industry has a poor record of cost-overruns, once tracked in a study by Paul Brown, a visiting fellow at Cambridge university, and published under the title Voodoo Economics.
Evolution Securities expects Centrica to show a slight dip in overall group operating profits to about £1.3bn, with its residential business showing profits down by almost half from £585m. Athanasiou says that without the 18% and 16% rises in gas and electricity prices announced recently, the company would have seen British Gas Residential Energy fall into a small loss.
But that will do little to assuage consumer groups, who have been calling for widespread competition investigations into the actions of the big six power suppliers, which include British Gas, Scottish and Southern Energy and EDF.
The energy and climate change select committee will unveil a report on Monday calling for widespread action by the regulator, Ofgem, to ensure abuses are curbed. The committee is concerned that customers may be pressured into switching supplier on the doorstep when confronted with an array of complex tariffs and a hard sell. Figures from Ofgem suggest that up to 40% of consumers who switch do not end up with a better deal.
Tim Yeo, the Conservative MP who chairs the committee, said on Sunday: "There is mounting concern in parliament about the doorstep selling techniques of large energy companies. If it turns out that consumers are being persuaded to switch contracts when it's not in their best interests, by salespeople keen to earn commission, then it would only be right for the energy companies to cough up compensation."
Richard Lloyd, executive director at the consumer group Which?, said: "People should be guaranteed the rate they sign up to and the right to get out of mis-sold tariffs. Where things do go wrong, they should get compensation or the difference back."
Corporate results this week will reveal that the motorist's loss is the oil industry's gain as energy groups BP and Royal Dutch Shell prepare to report significant profits. Shell is expected to record a 43% surge in second-quarter profits to $6.7bn (£4bn) on Thursday, while on Tuesday BP is forecast to record a profit of $5.7bn for the three months to June. BP's figures for the same period last year were blighted by the Deepwater Horizon disaster which forced the group into a $17bn loss. Both groups have benefited from an oil price that has averaged more than $100 a barrel over the quarter, lifting petrol prices about 16% higher than last year. Last week a litre of unleaded petrol cost an average 135.8p. A spokesman for the AA said: "Drivers will find it difficult to reconcile their predicament, with pump prices becoming unaffordable, with the big profits that oil companies are making."
BP, mainstay of the FTSE 100 index, can at least argue that pension funds gain from its higher share price. BP stock has risen more than 50% since the Deepwater nadir. Airline passengers have had more shelter from the effect of high oil prices thanks to cut-throat competition between airlines. Nonetheless, fares have risen by about 5% in Europe this year, with business class passengers, deemed less sensitive to price hikes, on the receiving end of double-digit increases.
